Ayala Land Inc’s Tower One office building is seen at the heart of the Makati business district, March 11, 2016. — REUTERS/ROMEO RANOCO

THE Asian Development Bank (ADB) on Monday said it has given the greenlight for a $400-million policy-based loan to help the Philippines further develop the domestic capital market and increase financing for infrastructure projects.

In a statement, the multilateral lender said the loan will assist the Philippines’ efforts to create an efficient domestic debt market, and boost institutional participation in the market, specifically insurance firms and pension funds.

The ADB said the additional supply of long-term finance will help the country address an infrastructure financing gap estimated at around P2 trillion a year up to 2030.

“As the Philippines steers its economy towards sustainable and resilient growth after the devastating COVID-19 pandemic, it will require various sources of long-term financing to support the recovery of its industries and micro-, small-, and medium-sized enterprises; provide social protection; and fund its infrastructure development priorities,” ADB Principal Financial Sector Specialist for Southeast Asia Stephen Schuster was quoted as saying.

Mr. Schuster said a more diversified investor base will ease fiscal constraints in the country.

The further development and growth of the insurance and pension sectors can fuel economic growth and reduce poverty, the ADB said.

The policy loan will help build an enabling environment for more investment products aimed at long-term investors.

Compared to its peers in the region, the Philippines’ pension funds and the insurance sector accounts for a combined 12% of the country’s gross domestic product, versus Thailand’s 30% and Malaysia’s 80%. 

“There is huge potential in tapping this sector for long-term funds since they have long investment horizons and low leverage. These investors can offer better debt pricing and longer maturities in local currency and are less likely to sell or retreat during short-term market corrections,” ADB said.

The ADB is one of the Philippines’ biggest sources of official development assistance, with average annual lending of $1.9 billion in the last five years.

In 2021, the ADB lent around $2.2 billion to the Philippines, the bulk or 92% of which went to pandemic response programs. — TJT