THE ASIAN Development Bank (ADB) and the Philippines exchanged loan documents for a combined $600 million credit line for two projects that seek to expand private-sector participation in public infrastructure projects and promote financial inclusion.
ADB President Takehiko Nakao and Finance Secretary Carlos G. Dominguez III exchanged loan documents on Monday for the Expanding Private Participation in Infrastructure Program Subprogram 2 (EPPIP2), and the Inclusive Finance Development Program Subprogram 1 (IFDP1).
The EPPIP is a policy-based lending program with $300 million worth of funding, which supports government reforms to strengthen financial support to public-private partnerships (PPPs), expand the pipeline of PPP projects, and strengthen the legal and regulatory framework for PPPs.
It is an expansion of the previous EPPIP program in 2012 when PPP regulatory frameworks had just been established. Mr. Dominguez said that a total of 12 national and two local government-level PPP projects were awarded so far since the previous program.
The previous EPPIP program helped the government complete the implementing rules and regulations for the use of alternative dispute resolution mechanisms in all contracts involving PPP projects, and also developed a handbook on standard PPP contract provisions.
However Mr. Dominguez said that the government is still standing by its policy to restrict PPPs largely to the operations and maintenance components of a project, in order to fast-track the implementation. For the initial stages the government prefers to use budget funds and official development assistance, a reversal of the procedure observed by the previous administration.
“What we have done is basically de-emphasize the PPP in the construction phase for projects so they can be implemented immediately. Although we have de-emphasized the construction, we have pushed forward the PPP in the management (area),” Mr. Dominguez said, citing success in the Clark International Airport and the Panglao Airport using that hybrid type of PPP.
But he said that the government remains keen on pure PPPs as long as they introduce new technology. He added that the government is entertaining proposals for the proposed international airports in Bulacan and Sangley, as well as the Ninoy Aquino International Airport rehabilitation.
The IFDP1 meanwhile is another policy-based lending program with $300 million worth of funding, which aims to support government reforms to expand financial products and services to the poor, promote financial literacy, and invest in support networks and infrastructure such as the national retail payment system and the new national identification system.
ADB studies show that only 34% of Filipino adults had a bank account in 2017, compared with 82% in Thailand and 49% in Indonesia. A separate study from the Bangko Sentral ng Pilipinas said that only 14% Filipino adults borrowed from a bank last year.
“ADB is committed to supporting the Philippine government as it pursues more inclusive growth across the archipelago. Boosting the government’s effort to build up infrastructure and expand financial services in underserved areas of the country will help reduce income inequality in the country, which has persisted despite sustained strong economic growth in recent years,” said Mr. Nakao.
“It is encouraging that the Philippine economy is continuing on a sustained, high growth rate and the robust banking sector is helping build resilience amidst global volatility,” he added.
Mr. Nakao also commended the Philippine government’s efforts to stabilize high inflation and rationalize tax systems.
The ADB expects its board to approve before the end of the year a $400 million emergency loan and $8 million grant for the reconstruction and recovery of Marawi City.
The ADB is also looking at an additional technical assistance loan for the Infrastructure Preparation and Innovation Facility to expand the existing $100 million credit line, to help the government prepare and design infrastructure projects.
The government seeks to raise public spending on infrastructure to 7.4% of gross domestic product by 2022 from 5.1% in 2016.
The ADB has set a $7.4 billion financing pipeline for the Philippines from 2019 to 2022, which is about double than the program in the previous three years. — Elijah Joseph C. Tubayan
