ADB boosts Philippine lending

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Asian Development Bank (ADB)

By Beatrice M. Laforga

THE ASIAN DEVELOPMENT BANK (ADB) has increased its overall lending program to the country to a “record” level up to 2022, with the biggest focus this time on infrastructure projects, the regional lender announced in a press briefing on Thursday.

ADB Country Director for the Philippines Kelly Bird said the bank “scaled up” its lending program for the country by investing at least $2.5-3 billion annually to total up to $12.1 billion from this year to 2022, a “historical increase” compared to $800-million annual amount the lender invested from 2011 to 2018, which totalled to $6.4 billion.

Under the ADB’s Philippines Country Operations Business Plan 2020-2022, programmed lending totals $9.1 billion for those three years.

The lion’s share or 59.5% of ADB’s lending pipeline will be for transportation projects such as railways, bridges, roads and elevated pedestrian walkways.

This is followed by financing for public sector management with a 14% share.

To compare, ADB’s financing for public sector management accounted for more than half or 53.1% of its lending program in 2011-2018, while transport financing accounted for just 7.7% in those eight years.

“You will see not only have we scaled up our program, you can see that we’ve rebalanced it as well, focusing now on transportation, which accounts for 60% of our lending program, again, followed by public sector management,” Mr. Bird said in the briefing in Taguig City.

“But you have also seen agriculture and natural resources now… third largest sector of focus,” with 9.9% from 1.6% previously, he added.

Mr. Bird said that the regional lender “ramped up” support for the agriculture sector to support the government’s push to improve the sector’s competitiveness. Agriculture accounts for about a fourth of the country’s jobs, but contributes just a tenth to national production.

“We’re ramping it up for two reasons: one is the agriculture sector has been a drag on economic growth… and you still have a large segment of the population reliant on agriculture,” he noted.

“So… and if you look at the reasons why it’s been a drag, one is the low competitiveness. There were previous policy restrictions that were drag on agriculture.”

Other sectors in the ADB’ lending pipeline are finance (8.3%), education (4.1%), health (2.5%), as well as water and urban services (1.7%).

Mr. Bird also said that if the $2.5-billion annual lending program were realized, the Philippines will climb to become the ADB’s second-largest borrower from being the fifth last year and ninth in 2017.

“I kind of see that this is ADB’s ‘Big Bang’ lending program. The resources that we’re committing to the Philippines, to support the Philippines’ reforms and programs is a historical increase in our limited resources… And if we probably achieve at least $2.5 billion a year, the Philippines will probably be among our top three borrowers,” he said.

For this year, ADB set a $2.6-billion lending program, half of which or $1.3 billion will fund the first tranche of the Malolos-Clark Railway Project that is one of the big-ticket infrastructure projects under the “Build, Build, Build” program.

With a total of $2.75 billion worth of funding, the project is the largest ADB project financing to date.

“Contracts for civil works for the project are expected to be awarded before the end of the year and construction work may begin in the second quarter of 2020,” the ADB said in a statement.

The agreement on a secondary education support loan program for the year worth $300 million has already been signed.

The ADB is programmed to finance five more projects under this year’s program but is still waiting for approval from either its board or the government. “We have three other programs and projects that are now at the final stages of government approval. And we are aiming for to submit to our board for approval in November and December,” Mr. Bird said.

The Infrastructure Preparation and Innovation Facility, with $200 million additional financing this year, will support engineering designs and feasibility studies and sustain a steady flow of investments for the government’s infrastructure projects under the “Build, Build, Build” program.

ADB will also set aside $126 million to fund part of the Angat Water Transmission Improvement Project. Mr. Bird said that the financing will support construction of a 15-kilometer aqueduct that will help expand the capacity of Metropolitan Waterworks and Sewerage System to deliver water.

“This will be an incredibly important project. We would start procurement very soon for this project and hope that we can commence implementation around the middle of next year,” Mr. Bird said.

He also said that there were two policy loans which will support local government ($300 million) and the Facilitating Youth School-to-Work transition program ($400 million).

“… [T]he project that we’re in the final stages of hearing will be a project to the Philippines Competition Commission (PCC), and that is designed to be a $25 million project and that’s designed to build capacity of the PCC to be able to carry out their mandate drawn on global practices. And that one is scheduled for approval towards the end of the year,” he said.

2020-2021 LENDING
For 2020, transportation and infrastructure will account for the bulk of ADB’s funding program, including the South Commuter Railway Project that will connect Manila and Calamba, Laguna ($1.2 billion) and the proposed EDSA Greenways Project ($100 million) consisting of wide five-kilometer “elevated walkways in four high density traffic locations along the main EDSA highway in Metro Manila,” the regional lender said.

Mr. Bird said that his office aims to bag board approval for the first tranche of the South Commuter Railway Project by mid-2020.

“Construction is expected to be around for more than a year so we can start construction already at the end of next year so by 2021, it can be fully used,” ADB Transport Specialist for Southeast Asia Shuji Kimura said in the same briefing.

Other projects included in the program for next year are the Integrated Flood Risk Management Sector Project ($400 million) which will finance six river basins across the country, and the Metro Manila Bridges Project ($180 million) that will construct three bridges to help ease traffic conditions within the city.

Mr. Bird said that the integrated flood risk management project will improve infrastructure to minimize floods through six river basins: two each in Luzon and Mindanao and one in the Visayas.

ADB’s 2020 lending program for the Philippines will also include financing for the Expanded Social Assistance Project ($500 million) for the government’s conditional cash transfer program as well as for the agricultural competitiveness program.

Other projects in the pipeline for next year are the support for Agrifood System Competitiveness Program ($300 million), the Philippine City Disaster Insurance Pool Project ($100 million), the Sustainable Tourism Development project ($100 million) and Regional Development Facility ($40 million).

Also programmed for financing next year are the Davao Public Transport Modernization Project ($70 million), Local Government Revenue Mobilization Project ($28 million), the Expanded Social Assistance Project ($500 million) and the Inclusive Finance Development Program ($300 million).

Slated for lending in 2021 are the second tranche of the Malolos-Clark Railway Project ($1 billion), Metro Rail Transit, Line 4 Project ($500 million), Bataan-Cavite Bridge Project ($500 million), Laguna Lakeshore Road Transport Project ($500 million) and the Mindanao Irrigation Development Project ($100 million).

Other projects were the Local Government Development Program ($300 million), Facilitating Youth School-to-Work Transition ($300 million) and the support to the Universal Health Coverage Project ($300 million).