In October 2022, the Philippines’ Department of Budget and Management (DBM) approved the Department of Transportation’s (DOTr’s) proposed PHP167.12 billion budget for 2023. This represents a 120 per cent increase compared to the department’s 2022 budget. The allocation under the 2023 National Expenditure Programme (NEP) will be used to finance some key ongoing urban transport projects, such as the North South Commuter Railway, the Metro Manila Subway project, the LRT Line 1 Cavite extension, the PNR South Long-Haul project, and the Cebu Bus Transit project.
This increase in funding highlights the current government’s effort to continue the projects under the Build Build Build programme. In previous years, many agencies under the DOTr complained about the lack of sufficient funding for carrying out proposed projects as well as maintaining and upgrading the existing systems.
The public budget continues to be a major source of financing for most transport projects in the country. Hence, appropriate allocation is key in ensuring that these projects are completed on schedule.
Increased funding to speed up the completion of projects
Of the total budget approved for 2023, PHP143.95 billion has been allocated for financing ongoing transport projects in the Philippines. The remaining amount will be used for financing the operations and administration of the DOTr and its agencies.
Table 1 details the budget allocation for 2023 for the DOTr’s rail and public transport projects in the Philippines.
Compared to the PHP120 billion approved under the 2022 NEP, the 2023 budget has been increased in an attempt to speed up the development of key transport projects to meet the increasing demand for public transport in the post-Covid-19 period.
While funds were allocated for some new projects like the EDSA Busway as well as the fuel subsidy programme for public transport, some key projects—such as the PNR Long Haul, Metro Manila Subway, and the LRT Line 1 Cavite extension project—saw lower budget allocations for 2023 compared to 2022. The largest budget cut was for the PNR Long Haul project, with only PHP1.07 billion approved for 2023, which is nearly 64 per cent lower than the amount approved for 2022. No reason for this reduction was provided.
The MRT3 rehabilitation project also received a lower allocation as compared to 2022, although this is because the main delivery of the project has been completed ahead of time and the approved budget will be used to finance the maintenance contract till 2023.
As for the fare subsidy programme for the MRT3, there has been no change in its budget allocation, with PHP7.11 billion earmarked for both 2022 and 2023.
Further details about the projects are given in the sections below.
Subsidy for MRT3
The DOTr’s fare subsidy programme for Manila’s MRT3 line aims at keeping fares low as well as offering free-ride trials to increase ridership on the urban transit system. Under the 2023 NEP, PHP7.11 billion has been allocated for this.
Image 1 shows the budget allocation trend for the subsidy programme since 2021.
Compared to the PHP120 billion approved under the 2022 NEP, the 2023 budget has been increased in an attempt to speed up the development of key transport projects to meet the increasing demand for public transport in the post-Covid-19 period.
While funds were allocated for some new projects like the EDSA Busway as well as the fuel subsidy programme for public transport, some key projects—such as the PNR Long Haul, Metro Manila Subway, and the LRT Line 1 Cavite extension project—saw lower budget allocations for 2023 compared to 2022. The largest budget cut was for the PNR Long Haul project, with only PHP1.07 billion approved for 2023, which is nearly 64 per cent lower than the amount approved for 2022. No reason for this reduction was provided.
The MRT3 rehabilitation project also received a lower allocation as compared to 2022, although this is because the main delivery of the project has been completed ahead of time and the approved budget will be used to finance the maintenance contract till 2023.
As for the fare subsidy programme for the MRT3, there has been no change in its budget allocation, with PHP7.11 billion earmarked for both 2022 and 2023.
Further details about the projects are given in the sections below.
Subsidy for MRT3
The DOTr’s fare subsidy programme for Manila’s MRT3 line aims at keeping fares low as well as offering free-ride trials to increase ridership on the urban transit system. Under the 2023 NEP, PHP7.11 billion has been allocated for this.
Image 1 shows the budget allocation trend for the subsidy programme since 2021.
The programme has been successful in increasing daily ridership on the MRT3 line. During one of the free-ride trials in 2022, the average ridership during the weekday increased by 27.8 per cent. This programme is expected to be continued in the future, although it has not been very effective in increasing long-term ridership.
EDSA Busway project
The 2023 budget is the first time that public funds have been approved for the DOTr’s EDSA Busway system in Metro Manila. The government launched the EDSA Busway in June 2020 to facilitate the seamless movement of high-capacity public utility buses.
Around PHP211 million has been earmarked for the project. The funds will be used to finance the construction of busway concourses as well as any planned network or fleet expansion during the year. The department is also considering the option of privatising the system, which will allow it to mobilise increased funding for the EDSA Busway.
Currently, only 550 buses are operational on the network, compared to the pre-pandemic level of 3,300 units, with a daily ridership of around 335,000 passengers. This is one of the DOTr’s key land transportation projects and hence sufficient financing is critical in ensuring that the system can eventually support around 600,000 trips per day.
Fuel subsidy for public transport
The fuel subsidy programme for public transport was launched to mitigate the effect of rising oil prices in light of the current global fuel crisis. For 2023, PHP2.50 billion has been allocated for subsidising the fuel costs for buses, minibuses, shuttles, jeepneys, UV expresses, taxis, and tricycles across the Philippines. The programme will also cover ride-hailing services and motorcycle taxis.
The fuel subsidy programme is expected to last only until 2023, so it is most likely that the budgetary allocation for this will be reduced substantially in 2024 as fuel prices are expected to stabilise by then.
MRT3 rehabilitation project
Around PHP548 million has been allocated for the MRT3 rehabilitation project in Manila. Although the project was completed ahead of schedule in March 2022, the approved amount will be used to finance an ongoing maintenance contract for the newly upgraded rail fleet and systems till May 2023.
The MRT3 rehabilitation project commenced in 2019 and was overseen by Sumitomo Corporation and Mitsubishi Heavy Industries. The fleet size has been increased from 10 to 23 so as to expand the daily capacity from 200,000 to 600,000 passengers. The trains have also been upgraded to operate at a maximum speed of 60 km/hr from the earlier speed of 25–30 km/hr. The headway has been reduced from 9 minutes to 4 minutes.
The tracks, signalling systems, communications systems, power supply, overhead catenary, stations, and depot facilities have also been upgraded.
Image 2 shows the budget allocation trend for the MRT3 rehabilitation programme since 2020.
LRT Line 1 Cavite extension
The LRT Line 1 Cavite extension is an ongoing project which will extend the Metro Manila LRT line by 11.7 km. For 2023, the project has been allocated a budget of PHP2.74 billion. It will cover civil works and trials before partial operations commence in 2024.
However, the allocation for 2023 is 20 per cent lower than that for 2022.
Image 3 shows the budget allocation trend for the LRT Line 1 Cavite extension project since 2020.
Although construction on the LRT1 extension commenced in 2019, the national budget over the next three year allocated only a total of PHP74 million. There was, however, a substantial increase in allocation in 2022.
The extension project is nearing its final stages, with the line scheduled to open to service in 2027. Appropriate allocation needs to be maintained over the next few years to ensure that the project is completed on schedule.
Metro Manila Subway – Phase 1
For 2023, PHP26.26 billion has been earmarked to fund the construction of the first phase of the Metro Manila Subway, receiving nearly 20 per cent of the total budget for ongoing transport projects. The approved amount for 2022 was, however, higher at PHP34.60 billion. This amount was mostly used to finance Right-of-Way Usage Agreements (ROWUAs) and key works contracts.
Construction commenced in October 2022 and will continue till 2029, making this one of the DOTr’s long-term rail projects. Nearly 76 per cent of the project cost will be covered by the Japan International Cooperation Agency (JICA), with the government budget covering only PHP117.7 billion. In light of this, the annual budget allocation for the subway project is expected to be smaller over the next seven years.
North South Commuter Rail (NSCR)
The NSCR project includes the construction of a 147-km-long rail line in Luzon. For 2023, the Government of the Philippines has allocated the largest share (51.74 per cent) of its annual budget, approving more than PHP74 billion for construction works during the year.
Image 4 shows the budget allocation trend for the NSCR project since 2019.
Allocation for the NSCR project peaked in 2020 at PHP84.73 billion, falling over the next two years, before recovering by 26 per cent for 2023. While most of the major construction contracts for all three phases of the rail project have been awarded, five contracts under the PNR Calamba phase are yet to be awarded. The budget for 2023 will most likely be used to finance these remaining contracts as well as the ongoing construction works under Phases 1 and 2.
As the NSCR project is one of the key transport projects in the Philippines, the project will most likely continue to receive a large share of the DOTr’s annual budget over the next two years.
PNR Long Haul
The PNR Long Haul project involves the construction of a 565-km-long rail line connecting Metro Manila to Sorsogon and Batangas in Luzon. This is one of the country’s key rail projects that has seen the largest drop in budget allocation for 2023 as compared to 2022. Only PHP1 billion has been earmarked for works during the year.
As of the end of August 2022, there is still uncertainty about the main source of financing for the project, with negotiations underway with the Government of China. However, the project still needs funding for civil works, trains, and electromechanical equipment. In light of this, funding for 2023 could fall short unless an agreement is reached on the official development assistance (ODA) from China.
Cebu BRT
The Cebu BRT is a planned 16-km-long public transport system in the Philippines. The 2023 annual budget has allocated PHP700 million for construction of the BRT network.
Progress on the Cebu BRT has been delayed due to changes in the project design and modifications in the routes. A World Bank report also found that progress had been negatively affected due to the lack of funding. Only 19 per cent of loans have been disbursed till date.
Additionally, although the civil work under Package 1 was scheduled to commence in October 2022, the bidding process was declared a failure in 2021. A second bidding process was conducted in May 2022. Work on the system is now expected to commence in January 2023, with the commencement of complete operations scheduled for 2025.
Missing components of the budget
Although the PHP167 billion budget for 2023 has covered most of the key ongoing rail and urban transport projects as well as the ridership-boosting programmes in the Philippines, some components are missing from the 2023 budget.
Public utility vehicles (PUV) modernisation programme
The PUV modernisation programme aims to upgrade the existing jeepneys across the Philippines by deploying a cashless payment system and a tracking device. Additionally, the modernised vehicles will be able to operate on sustainable and green fuels.
However, the DOTr’s proposed budget of PHP778 million for 2023 was rejected by the Government of the Philippines. This means that the department currently has no budget to deploy its planned 2,650 modernised jeepneys in 2023. There are currently 5,300 modern PUVs across the Philippines.
The leftover equity subsidy might be one of the main reasons for the rejection, as subsidies worth more than PHP1 billion, approved in 2022, are currently unused. Additionally, only 3 per cent of the targeted number of modernised jeepneys are operational as of October 2022, three years after the start of the programme’s transition period.
Libreng Sakay
Another missing component of the 2023 budget is funding for the DOTr’s Libreng Sakay programme. The department had proposed an allocation of PHP12 billion for its service contracting programme, but this was rejected by the DBM. The DOTr is expecting the Office of the President to provide some of its own funding to continue the programme in the face of rising fuel costs.
The programme was launched in 2020, during the height of the Covid-19 pandemic in the country, to provide free rides to passengers while incentivising PUV drivers. The programme has been renewed over the next two years, with the DOTr also planning to continue Libreng Sakay in 2023.
Challenges going forward
One of the major issues faced by the DOTr and its agencies is the low fund utilisation rate. Image 5 shows the utilisation of the annual budget since 2016. This indicates how much of the approved budget under the NEP has been disbursed to the respective projects. During the six-year period covered here, the average utilisation rate was only 39 per cent.
The low disbursement rate in 2021 is also prevalent across all programmes of the DOTr, including the Rail Infrastructure Programme (25.6 per cent).
This underspending can be attributed to poor planning on the part of the agency as well as poor capacities for procurement, as indicated by delays and failures in bidding (as in the case of the Cavite extension and the Cebu BRT project).
The DOTr’s poor budget utilisation calls into question the agency’s efficiency and ability to execute its projects. Underspending can also seriously affect the government’s economic recovery efforts through public infrastructure spending which is necessary to generate jobs and to enhance the economy’s overall competitiveness.
Department of Transportation of the Philippines, MRT3, Libreng Sakay programme, PUV modernisation programme, Cebu BRT, PNR Long Haul, North-South Commuter Rail, LRT-1 Cavite extension, EDSA Busway, urban transit, Philippines,
