ADB approves $300-M loan for Philippine PPP policy

The Asian Development Bank’s (ADB) board of directors has approved a $300-million policy-based loan to support the Philippines in strengthening the country’s framework under which the private sector can participate in the government’s “Build, Build, Build” (BBB) infrastructure development program.

The loan will have a 15-year term, including a grace period of 3 years and an annual interest rate determined in accordance with ADB’s London interbank offered rate (LIBOR)-based lending facility, which is the ordinary capital resources (OCR).

Government reforms supported by ADB under the Expanding Private Participation in Infrastructure Program (EPPIP) subprogram 2 seek to create the enabling policy environment that will allow public-private partnership (PPP) projects to flourish using private sector expertise and innovation, the Manila-based multilateral lender said on Monday.

“PPPs can raise the quality of life for citizens by providing reliable public services through efficient infrastructure. Reforms under the EPPIP program have been successful in stimulating the PPP market and improving the quality of infrastructure projects in the Philippines,” said ADB senior trade specialist Cristina Lozano.

With its fast-growing economy, archipelagic geography, expanding population, and rapid urbanization, the Philippine government aims to raise infrastructure investments to 7.4% of gross domestic product by 2022 from 5.1% in 2016, the bank said in a statement.

This $300-million loan is separate from the $7.1 billion lending pipeline for 2019-2021, “because this loan falls under the 2018 portfolio,” the bank said in response to an emailed query.

ADB and the Philippines signed on June 29 a $7.1-billion sovereign lending program from 2019 to 2021. The memorandum of understanding was signed with the National Economic and Development Authority (NEDA) and the Department of Finance, the bank said on July 4.

The proposed 2019-2021 lending program will support the BBB, with two-thirds of the ADB pipeline, or about $4.5 billion, allocated to projects that connect regions and communities and manage urbanization, such as railways, bridges, roads, and flood management.

“Please note that the $7.1-billion lending pipeline for 2019-2021 is indicative and may still change,” the bank said on Monday.

The BBB program, part of the medium-term Philippine Development Plan, is estimated to require a total $168 billion in investments for 75 high-impact priority projects nationwide. To finance this, the government wants to use an optimal funding mix composed of government spending, official development assistance, and private capital.

“The [$300-million] loan will have a 15-year term, including a grace period of three years and an annual interest rate determined in accordance with ADB’s London interbank offered rate (LIBOR)-based lending facility, which is the ordinary capital resources,” the bank said.

The loan will have to be formally signed by ADB and the Government of the Philippines moving forward. After the loan signing, disbursal can take place, depending on the government’s timetable and requirements.

The date of signing is still to be determined, the bank said.

ADB said it has been supporting reforms that have helped ensure sustainable funding for government direct and contingent support to PPPs, improve long-term infrastructure planning, strengthen the government’s capacity to manage the PPP program, and enhance the legal framework for PPP preparation, approval, and implementation.

Reforms also helped facilitate the use of PPPs by local government units (LGUs) as an alternative in pursuing infrastructure development. The government-run PPP Center provided support to LGUs to develop and implement PPP projects in priority sectors such as water supply and sanitation, solid waste management, and urban transport.

“The Philippines has made significant progress since the PPP program was launched in late 2010,” said ADB country director for the Philippines Kelly Bird. “With a huge project pipeline being rolled out under the BBB program of President Rodrigo Duterte, leveraging public resources via private sector participation remains relevant.”

Classified in 2011 as an emerging country in terms of PPP readiness, the Philippines now ranks seventh in the overall ranking, joining India, Japan, and the Republic of Korea in the group of developed PPP markets, according to the 2014 Infrascope report of The Economist Intelligence Unit, according to ADB.

“The PPP market review conducted by the Organization for Economic Co-operation and Development considers the Philippine PPP framework a success.”

ADB said it is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty.

Established in 1966, it is owned by 67 members—48 from the region. In 2017, ADB operations totaled $32.2 billion, including $11.9 billion in cofinancing. —VDS, GMA News