Challenges of buy-local drive

President Marcos’ big push to use local construction materials in future public infrastructure projects is a most welcome development for the private sector. During a meeting in the Palace on Oct. 26, the Chief Executive said he agrees with the proposal for local procurement presented by the Private Sector Advisory Council (PSAC), as he recognizes the importance of giving preference and priority to building materials manufactured in the country.

“Our advocacy is really to promote our buy local, Filipino-made products for Filipinos. It’s just fair for our government to take the lead, in also patronizing our own locally made products,” PSAC lead convenor Sabin Aboitiz was quoted by Malacañang as saying. The President adds that this is “a step toward the right direction as preference and priority in the procurement of government projects should be given to local products that meet the specified or desired quality.”

Mr. Marcos thus ordered the Department of Trade and Industry (DTI) to coordinate with PSAC in coming up with a list of specific construction materials that can be used in government infrastructure projects. He also directed the Department of Budget and Management, through the Government Procurement Policy Board, to complement the policy of giving preference to local materials through relevant guidelines, subject to existing laws, rules, and regulations.

This policy move provides a lot of opportunities to the private sector given the long list of infrastructure projects under the “Build Better More” program of the Marcos administration. Last March, the National Economic and Development Authority (Neda) announced that the President has approved 194 high-impact infrastructure flagship projects worth P9 trillion. Of these, 123 were initiated during his administration, while the remaining 71 projects were begun by the administration of former president Rodrigo Duterte. Socioeconomic Planning Secretary Arsenio Balisacan said then that the majority of the projects are in physical connectivity; water resources such as irrigation, water supply, and flood management; ventures in digital connectivity, health, power and energy, agriculture, and other basic infrastructure. Specifically, some of the big-ticket projects on the list are railways in Panay, Mindanao, and Luzon; the rehabilitation of the Ninoy Aquino International Airport; a huge transbasin irrigation system in Ilocos Sur, and the Metro Cebu expressway.

But first things first. The primary challenge is the need to upgrade and expand the capabilities of the Bureau of Philippine Standards, an agency under the DTI, considering the persistent problem of substandard construction materials still entering the local market. Only last June, the DTI seized nearly P30 million worth of steel products in Davao and Laguna that failed to meet quality and safety standards. A bigger challenge, however, is the lack of capacity in the country to meet an anticipated sharp jump in demand for construction materials once the buy-local policy takes effect. Consider the case of cement and steel, two of the biggest components in infrastructure projects. The Philippines was the world’s second-largest cement importer in 2022 with inbound shipments amounting to $638 million, according to the online data platform Statista. It was topped only by the United States with cement imports worth $2.7 billion. Philippine imports of iron and steel, meanwhile, amounted to $5.23 billion in 2022, according to the United Nations Comtrade database on international trade.

There is therefore an urgent need to expand the capacities of local manufacturers even before the buy-local policy comes into effect. There is no doubting the presence of world-class manufacturers here. PSAC says it sought the government’s support to patronize the local industry as it emphasized that the Philippines had a lot of talents and products that are world-class quality. Perhaps proof of this “talent” is SteelAsia Manufacturing Corp., the country’s biggest steel producer, which has so far exported P1.32 billion worth of steel bars to Canada, a country where quality and performance standards are high. However, it laments that the sector needs to expand and the Philippines must have its own integrated steel industry to give birth to new businesses capable of producing ships, cars, and appliances, aside from supporting construction and housing.

The sad fact is that the Philippines still imports most of its steel needs, sapping the country’s dollars and surrendering employment opportunities to other countries. As SteelAsia chair and CEO Benjamin Yao puts it clearly: “In the Philippines, we export our resources such as steel scrap and iron ore, then import back finished steel products. This is a tragedy because the value and the jobs are created in another country and … the Philippines [remains] import-dependent.” That, in a nutshell, is the biggest challenge that the private sector needs to address now that Mr. Marcos has started shifting government policy toward helping local manufacturers of construction materials.