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September 21, 2019

Skilled workers shortage challenges the 180 billion USD infrastructure development program in Philippines

Philippines infrastructureThe ambitious plans of the Philippines President Rodrigo Duterte to boost economy growth with a 180 billion USD infrastructure program meet a serious obstacle. Many people, who need to build all roads, bridges, airports and railways work abroad. For decades, the Philippines has relied on money sent by gastarbeiters working abroad, including babysitters, maids, sailors, nurses, and construction, who sometimes receive salaries over 4 times higher.

While Rodrigo Duterte is raising billions of dollars in debt and taxes to improve the collapsing transport network of the country – worse than Sri Lanka and Vietnam – the loss of qualified staff is causing a labor crisis that raises wages and house prices. Labor shortages are a problem for the construction industry, and now there is a need for additional skills training.

The Philippine economy grew by 6.7% in the past year, and according to the World Bank, higher investments are crucial to sustaining this growth rate. As part of its construction strategy, Rodrigo Duterte plans to increase infrastructure spending to 7.3% of GDP by 2022 from 6.3% this year.

The first project is the new terminal at Clark International Airport, which will triple its capacity to 12 million passengers per year. Other important initiatives include the construction of the first subway in Manila and the 102-kilometer railway line in Mindanao, an island in the southern part of the country, which is in a military situation after a five-month battle with Islamic militants.

To finance these projects, the authorities introduced new taxes to raise over 180 billion pesos (3.5 billion USD) by 2020. A large part of the funding will come from China and Japan, which are struggling to win orders for their companies, building stronger ties with their neighbors. They have promised 9 billion USD in loans and subsidies.

The Philippines has a low budget deficit and the authorities can afford new loans without putting the economy at risk for the next two years.

The biggest challenge will be to find engineers and skilled staff to work with cranes, dredgers and heavy equipment. More than 1 million Filipinos leave the country every year. The lack of skilled workers creates ever greater constraints on sector growth, resulting in a delay in projects and a steady rise in costs. Duterte’s failure to push infrastructure plans could negatively affect the country’s growth prospects.

As for cadres, the country is in a much more serious situation than neighboring Singapore, Malaysia and Thailand. The lack of qualified staff has already delayed some projects in private construction, which has led to an increase in house and office prices. Of the 16,200 additional homes expected in Manila last year, only 7,400 were completed in the first 3 quarters. This will trigger a bidding war for construction workers.

In order to alleviate the shortage, the State Agency for Technical Education and Skills Development trains more construction workers and engineers. In order to fill vacancies, some Philippine construction companies retrain employees or hire more workers from the province. Others build their own training facilities for masonry, carpenters, welders and crane operators.

Part of the problem is that the projects have become bigger and more complex, which requires an increase in knowledge. Companies now offer skill-based bonuses to retain qualified staff. After all, one of the best sources of skilled workers, managers and consultants is the 10 million Filipinos living and working abroad.

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