The Market Monitor Minding the Nation's Business
By Luis Leoncio
The Asian Development Bank (ADB) has allotted nearly $4 billion (P200 billion) to bankroll infrastructure spending under President Duterte, which is expected to reach P1.5 trillion until 2022 when Mr. Duterte’s term ends.
The ADB allotted to the country about $3.8 billion in loans and another $21.8 million in non-lending programs from the Asian Development Bank (ADB) to help fund its accelerated spending programs on infrastructure and social services.
A report by the DOF’s International Finance Group (IFG) said the proposed lending pipeline under the ADB’s Country Operations Business Plan (COBP) for the Philippines will focus on three priority areas or $1.8 billion or P90 billion, equivalent to 47.4 percent of the total to infrastructure development; about $1.5 billion or P75 billion, equivalent to 39.5 percent for education and skills development, access to finance, expanded social protection and employment opportunities for the youth, and $500 million or P25 billion making up 13.1 percent of the program loans to good governance and finance. The COBP will cover the period from 2018 to 2020.
“Program loans under the proposed lending pipeline make up 39 percent of the COBP while project loans account for 61 percent,” the IFG said in its report to Finance Secretary Carlos Dominguez III.
According to the IFG, the ADB has also agreed to explore co-financing arrangements with the Japan International Cooperation Agency (JICA) on major infrastructure contracts such as the proposed PNR Malolos-Clark Railway and the PNR Commuter South Line project.
The ADB agreed to help the government to beef up its capacity and readiness in handling and financing infrastructure deals, particularly on the construction of the country’s railways.
The IFG said the ADB has also agreed to the Philippines’ request to hold quarterly meetings to ensure that the ADB’s country partnership strategy is aligned with the government’s priorities under the Duterte administration.
“The Bank has also responded positively to our request to increase the Philippines’ lending envelope and provide more grants and technical assistance,” the IFG said.
According to the IFG, the projects covered by the COBP for 2018-2020 include the Central Spine Roll-On/ Roll-Off (RORO) Project and the Mindanao River Basin Flood Control Project.
The Bank also committed to design a $300 million package of critical transportation infrastructure initiatives to ease Metro Manila traffic and is now exploring the possibility of co-financing this initiative with other multilateral institutions such as the Asian Infrastructure Investment Bank and the Agence Francaise de Developpement, the IFG said.
For the non-lending component of the COBP, the programs include support for project preparations and capacity building of various government agencies.
The ADB recently upgraded its growth projection for the country this and next year, making country among the fastest-growing economies in Southeast Asia. For 2018, the ADB said the country’s gross domestic product (GDP) would expand to 6.7 percent from 6.6 percent earlier projected.
The ADB said the Philippines will be paced by fast-growing Vietnam and both countries would have the same rate of economic growth in the next two years.Economic growth of both countries outpaced that of Indonesia, Malaysia, Singapore and Thailand.
“High first quarter growth in Malaysia, the Philippines, and Singapore keeps Southeast Asia on track to meet forecasts of 4.8 percent growth this year and 5 percent in 2018,” said the ADB. It noted that higher public investment boosted first-quarter growth in the Philippines.
The Bank also cited exports rebound in the country. The ADB further said the growth outlook in Southeast Asia remained at 4.8 percent for 2017 and 5 percent for 2018. “Robust domestic demand, particularly private consumption and investment, will continue to support economies in the region,” it added.