The National Economic and Development Authority (Neda) is pushing for the revision of the Investment Coordination Committee (ICC) guidelines to include regional equity and environment indicators.
During Neda’s budget hearing on Wednesday, Socioeconomic Planning Secretary Karl Kendrick T. Chua said enhancing the Neda’s appraisal of projects at the ICC is one of its goals next year.
This is being done to ensure that projects do not only meet time and cost efficiency requirements, but also address infrastructure constraints in areas of the country that need it the most without harming the environment.
“We are proposing that apart from our present method of quantifying economic benefit only based on efficiency, meaning time or cost savings, we also look at equity and environment issues. The equity part will allow more rural areas to get better projects. And also we have to figure out what each project contributes to, for instance, carbon emissions,” Chua said in his presentation.
Chua explained that under the current ICC guidelines, projects undertaken in urban areas have the upper hand in securing approval because they lead to more cost and time savings, which are the primary consideration in the Economic Internal Rate of Return (EIRR) used in project evaluation.
The EIRR is calculated to determine whether a project’s economic returns were satisfactory and that money invested in them would achieve development objectives equivalent to or better than alternative investments.
In 2016, the Duterte administration brought down the ICC Social Discount Rate (SDR) to 10 percent from the initial 15 percent. The SDR reflects the hurdle rate which the EIRR of a project must equal to become viable.
“In other countries where they evaluate projects, they also look at equity wherein premium is given because your society or people in that province are low-income or less rich, so [projects have] a multiplier effect,” Chua said.
Chua said the current system prevents areas that need certain infrastructure from getting what they need. However, he said, if regional equity is added, a project that may fail to meet the EIRR requirement can still pass the ICC evaluation.
In terms of adding an environment criteria, Chua said this would include carbon emissions. He explained that building roads, for example, will naturally lead to more cars.
Placing the criteria would force the need to balance time and cost savings and the additional carbon footprint that will be created through a certain project.
“[The plan] is to use data to back the need for that infrastructure. Let’s say [a province] lacks water, lacks power, the poverty rate is high and makes it very transparent why this infrastructure is needed so that the proposal is not only based on persuasion or promotion, marketing but really grounded that this infrastructure in this province deserves this. I noticed that some regions and RDC’s [Regional Development Councils] are more persuasive than the others. So I would like to make it more objective,” Chua said.