Philippines eyeing ‘green investments’ despite tight fiscal space, Diokno says

THE government can pursue green investments despite the limited fiscal space, Finance Secretary Benjamin E. Diokno told an Asian Development Bank (ADB) conference, adding that such investments were factored in when the Philippines started drafting its medium-term goals.

“All these programs are embedded in our medium-term development plan that we are designing at the moment,” Mr. Diokno said during the ADB Governor’s Seminar on Thursday.

“We’re not so much concerned about the fiscal space because, to me, given what we have done, the fiscal space is still there, (and) we have embedded the important greening programs moving forward.”

ADB President Masatsugu Asakawa told the gathering, however, that fiscal consolidation in many countries is only a matter of time.

“I think (the time will come for) every country to shift the gears (from) fiscal expansion to fiscal consolidation. Of course, countries should pick the right time to do so. It cannot be too early; it cannot be too late,” he said.

The Philippines’ debt-to-gross domestic product (GDP) ratio was 62.1% in the second quarter, above the 60% threshold deemed sustainable for developing countries, and reflecting the debt taken on to finance the response to the coronavirus disease 2019 (COVID-19) pandemic.

Still, “the Philippines has maintained its financial footing,” Mr. Diokno said, crediting recent structural reforms and the reopening of the economy.

The government intends to bring debt-to-GDP to 52.5% by 2028, as well as reduce its budget deficit from 7.6% to 3% over the same period via higher tax collections, rightsizing, and projected growth of 6.5%-8%.

Pasi Hellman, a Finnish foreign ministry official sitting on the ADB board, said official development assistance may be harder to come by with even donor countries having limited fiscal space.

“That’s why we need to work even harder to ensure different development financing institutions and entities have shared goals and better coordination,” he said. “For climate mitigation, there is clearly more private and commercial financing available.” He proposed that public money be focused on “facilitating (and) catalyzing by preparing and making projects bankable.”

“The world really needs renewable energy, and energy efficiency solutions that are scalable also in developing countries and make good business sense,” he added. “This, again, is where public funding can help to mitigate risks to pave way for private sector to enter the markets.”

The Philippine government recently revised the implementing rules and regulations (IRR) of its Build-Operate-Transfer Law, in response to concerns from economists and business groups that the government remains too insulated from risk even if project delays are the result of delayed government deliverables.

“It has cured a number of perceived defects of the old IRR. (I) think the new IRR is more responsive and clearer to potential investors,” Mr. Diokno told reporters on Tuesday.

At the same event, Mr. Diokno also expressed the Philippines’ interest in participating in the ADB’s $14-billion food security and climate change facility, which was announced on Tuesday.

“The short answer is definitely,” Mr. Diokno said. “Definitely we will avail of this facility.”

“I have looked at the performance of the Philippine economy for the last two decades. Industry and services are growing, but agriculture has been in and out of recession. It’s what I call a laggard, and this is because of many structural defects in the sector,” he added, mentioning the “mild” failure of the government’s agrarian reform program. 

Funding for the $14-billion program will be sourced from the ADB’s sovereign and private sector operations, with assistance starting this year until 2025.

Meanwhile, Mr. Diokno said that the government is also looking to focus on developing Mindanao.

“I love to say that Mindanao is so rich that it can feed the whole country… Now that we have achieved peace in Mindanao, we will focus on Mindanao,” he said.

“We have a new government setup there, and there is a lot of interest from our development partners,” he added. — Diego Gabriel C. Robles