The Asian Development Bank on Thursday approved $600 million worth of loans to support the Philippine government’s efforts to tap more private participation for urgently needed infrastructure projects.
The first $300-million loan is earmarked to support expanded private participation in infrastructure investment through the promotion of public-private partnership projects.
The second loan, also worth $300 million, supports policy changes to deepen the nonbank financial sector to unlock more long-term private funding for infrastructure.
“PPPs are vital for infrastructure development and for a sustainable economy. While there has been significant progress on PPPs, further reforms are needed to increase private investment,” said Juan Luis Gomez, principal public management specialist at ADB’s Southeast Asia Department.
“These loans will help the government pursue policy reforms clearing obstacles to PPPs and increasing long-term private sector finance for them,” Gomez said.
Under-developed infrastructure was a drag on the Philippine economy, with the country ranked at 95 out of 144 countries globally for infrastructure quality, according to the World Economic Forum’s Global Competitiveness Report 2014-2015.
The government revived the national PPP program and took steps to boost its effectiveness. Remaining challenges include addressing right-of-way issues, tapping capital markets, designing infrastructure master plans, and completing legal and regulatory frameworks.
The PPP-oriented loan will support improved systems to assess and budget for right-of-way acquisition and resettlement of communities.
It will boost capacity and staff at the national PPP Center, and help to finalize work on proposed amendments to the build-operate-transfer law which are critical for sustaining the PPP program.
The second loan supports the development of long-term finance in the Philippines, where capital markets are comparatively small and illiquid, and provide limited intermediation to the private sector and to infrastructure finance.