To expedite the progress of projects under the Build Better More program, the Department of Transportation (DOTr) of the Philippines has proposed a budget allocation of PHP214.13 billion for 2024. This is nearly twice the department’s budget for 2023.
The Department of Budget and Management (DBM) has identified the transport sector as one of the 10 priority sectors under the national budget. Of the total allocation, the DOTr’s share represents nearly 3.7 per cent of the Government of the Philippines’ proposed spending in 2024. This will be used to support major ongoing projects, including the North–South Commuter Railway (NSCR) project and the Metro Manila Subway Project Phase I.
This focus on infrastructural development is aligned with the Philippine Development Plan (PDP) 2023–2028 and is also in consonance with the country’s Medium-Term Fiscal Framework (MTFF) 2022–2028.
Major spending on rail projects
Nearly 80 per cent of the DOTr’s proposed budget for 2024 has been earmarked for the construction and modernisation of various mass transit projects which are under different phases of development.
Figure 1 shows the main elements of the department’s budget as well as its share in the total allocation.
Figure 1: Key elements of DOTr’s 2024 proposed budget
Key projects that will receive financial support during the year include the NSCR, the Metro Manila Subway, the LRT Line 1 Cavite Extension project, the Philippine National Railways (PNR) South Long-Haul project, and the MRT 3 Rehabilitation project.
Table 1 lists some of the railway projects and programs funded under the DOTr’s 2024 budget.
The budget allocation for nearly all ongoing rail projects has been increased in 2024 as compared to 2023. Most of these projects are under construction, and the availability of funds will be a key factor in ensuring the timely completion of the lines.
Figure 2 shows the year-on-year change in the budget allocation by the DOTr for rail projects.
Figure 2: DOTr’s allocations for rail projects, 2023 and 2024
Subsidy for MRT3
The DOTr’s fare subsidy program for Metro Manila’s MRT3 Line is aimed at keeping fares low in order to increase ridership on the urban transit system. Under the proposed 2024 National Expenditure Program (NEP), PHP6.08 billion has been allocated for MRT3, a 14.37 per cent fall from the allocation in 2023.
Following fare hikes on LRT 1 and 2, in July 2023, the operator of MRT3 submitted a petition to increase fares on the line as well. If the petition is approved, the agency will need additional funds to continue subsidising 70 per cent of the end-to-end fares of passengers. In light of this added expenditure, the 2024 allocation for the program might fall short.
MRT3 Rehabilitation project
In May 2023, the second phase of the MRT3 Rehabilitation program started. This phase is aimed at increasing the capacity of the line from 350,000 passengers per day to 500,000 passengers per day. The project will also address operational issues on the line, which faced multiple suspensions during 2023, as well as improve safety. The plans call for the procurement of rolling stock, installation of tracks, as well as the improvement of the signalling system, power supply system, overhead catenary system (OCS), communications system, and depot and station equipment.
The project allocation of PHP2.92 billion is a steep increase from the PHP548 billion earmarked in the 2023 NEP.
Further, around PHP10.29 billion has been allocated for operating the line, which includes the equity rental payable to Metro Rail Transit Corporation (MRTC), the owner of the line. The DOTr will stop remitting yearly equity to MRTC by the end of its build-lease-transfer contract in 2025. Till then, this will be a component of the department’s budget.
Metro Manila Subway: Phase 1
The Metro Manila Subway project has received an allocation of PHP68.37 billion for 2024. This marks an increase of more than 160 per cent over the 2023 allocation. Most of the 2024 budget will be used to ensure that the construction, which started in May 2023, stays on schedule. Additionally, the DOTr expects PHP21.68 billion in right-of-way (ROW) and tax expenses during the year.
As of July 2023, work on the project was 33 per cent completed. Full completion of construction is scheduled for 2028, with the DOTr scrapping plans for the partial opening of the project in 2027.
Once operational, the 33-km-long underground line is expected to transport around 519,000 passengers daily.
North–South Commuter Railway System
The NSCR project will receive an allocation of PHP76.34 billion in 2024, accounting for more than 53 per cent of the DOTr’s budget for rail projects. Most of the funds will be used to ensure that the construction of rail projects stays on track to achieve the target completion date in 2028. Additionally, around PHP53.26 billion will be spent in 2024 to procure ROW.
In July 2023, the last of the civil works contract for the line was awarded.
LRT Line 1: Cavite Extension
In 2024, the DOTr will spend around PHP4.66 billion to pay its share in the delivery of the Light Rail Transit Line 1 (LRT1) Cavite Extension Phase 1. As of July 2023, works on the project were 88 per cent completed and were on track for the partial operation of the line in September 2024. Phase 1 covers the 6.7-km-long section within the city of Parañaque.
As for the Cavite Section project, progress is slow due to delays in the delivery of ROW. This section will cover the last three stations of the LRT1 Cavite Extension. The DOTr will use its 2024 budget to expedite the land acquisition process so that groundwork can commence.
PNR South Long Haul/PNR Bicol
The DOTr has allocated PHP3.08 billion for the PNR South Long Haul project, also known as the PNR Bicol project, in 2024. Most of the budget will be used for pre-construction works on the line. No timeline has been mentioned for the start of construction, although the rail project is on the government’s priority list.
MRT Line 4
For 2024, the DOTr has allocated a budget of PHP1 billion for the MRT Line 4 project. Most of this allocation will be used for pre-construction works.
However, it is highly likely that the amount will fall short. In May 2023, it was announced that the total project cost of the line had increased to PHP87 billion from the previously estimated PHP59.3 billion due to design changes. Around PHP2.32 billion is required to carry out early works, including PHP1.03 billion that is required for site clearing, which is scheduled to commence in Q1 2024.
Meanwhile, between 2023 and 2024, the DOTr plans to award the project management consultancy contract and to announce bids for civil works and railway systems and trains. Construction is expected to commence by Q3 2024.
In short, a great deal of key developments are planned for the MRT Line 4 project in 2024. A PHP52.81 billion loan request to the Asian Development Bank (ADB) for financing the project has been pending since October 2022. Although the DOTr is expected to sign the loan agreement by the end of 2023, if there is a delay in securing the funds, early work might be pushed back.
Land transport systems get a PHP6.4 billion boost
The second largest component of the agency’s proposed budget for 2024 is the allocation of PHP6.4 billion for the Land Public Transportation Program. Table 2 highlights some of the projects funded under DOTr’s Land Public Transport Program.
Figure 3 shows the share of key projects in the Land Public Transportation Program’s proposed budget for 2024.
Figure 3: Share of key projects in the Land Public Transportation Program’s 2024 budget
More than 60 per cent of the total allocation will go to the fuel subsidy program of the government. Around PHP2.5 billion has been earmarked for this program, the same amount as that allocated in 2023, to stabilise the effects of rising fuel prices. The effects of the Ukraine–Russia war on global fuel prices are expected to continue into 2024, so the DOTr’s allocation will be crucial in keeping fares in check.
The DOTr will also undertake some major bus projects in Metro Manila, Davao, and Cebu in 2024. Construction on the Cebu BRT commenced in early 2023 and will continue into 2024.
The PHP919 million allocated for the EDSA Busway project will be used to privatise the transit system. The DOTr plans to award the contract for the feasibility study of the privatisation by Q3 2023. The results of the study will be available in the first half of 2024.
Finally, around USD1 billion has been earmarked in 2024 for the Davao public transport modernisation project, which is aimed at transitioning the city’s bus fleet to electric and clean buses by 2025. At least 1,100 buses will be procured for the project, of which 400 will be e-buses while the remaining 700 will be Euro-5 standard diesel buses. Additionally, five bus depots and three bus terminals will be constructed as a part of the project.
Most of the procurement will be made in 2024, with some of the buses expected to commence operations within the year. Full rollout is expected by the end of 2025. The DOTr will finance 40 per cent of the project.
The remaining budget for 2024 has been earmarked for the DOTr’s regular programs, including general management, pre-feasibility and feasibility studies, engineering and design of transport infrastructure projects. The DOTr has also set aside PHP2.78 billion for ROW acquisitions for the different transport projects in 2024.
Public Utility Vehicle Modernisation program misses out second year in a row
The most surprising omission from the DOTr’s budget for 2024 is its Public Utility Vehicle Modernisation (PUVM) program. Under this program, jeepneys across the Philippines will be modernised by installing a cashless fare collection system and a tracking device. Additionally, the modernised vehicles will be able to operate on sustainable and green fuels.
In recent months, there has been considerable pushback from public utility vehicle (PUV) drivers due to the high per unit cost of these vehicles. In response, the DOTr announced that it will cover 28 per cent of the total cost of the transition. However, without a budget for the program for 2024, subsidies to modernise these vehicles will also need to be substantially reduced.
Challenges going forward
Despite the proposed increase in the DOTr budget for 2024, a massive chunk of it is expected to be spent mainly on two foreign-assisted rail projects. These are long-term projects that are expected to come online by the end of the decade. Compared to this, spending on shorter-term projects is much lower. Commuters have been calling for improvement in bus, PUV, and active transportation systems. However, most of these have been omitted or sidelined in the DOTr’s annual budget for 2004.
Additionally, as the costs of raw material keep increasing because of recent supply chain issues, the costs of the projects under construction are likely to go up. This combined with the delays caused by slow acquisition of ROW will most likely stall or hamper progress on ongoing projects.
Despite this, the DOTr’s planned spending in 2024 is a step in the right direction and offers strong evidence of the agency’s aim to significantly bolster the public transport infrastructure in the Philippines in the coming years.