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By Chino S. Leyco and Darwin G. Amojelar, Reporters
THE Philippines may resume issuing guarantees
for priority government infrastructure and social projects that the
private sector would pursue using foreign donor aid.
The Department of Finance disclosed this while
insisting that the government would maintain its balanced-budget
target for this year. Pundits have warned that the government may
push back its fiscal reform program as it plans to jack up public
spending to cushion the impact of a slowdown in the Philippines’
largest export market, the US.
“We want more public sector and private sector
partnership. Some have broached the idea of issuing guarantees to
corporations [that] want to invest in public projects,” Finance
Sec. Margarito B. Teves told reporters last week.
He said the government would ask the country’s
foreign donors during the upcoming Philippine Development Forum to
provide loans to private companies that are interested in investing
in government projects.
The forum is an annual event wherein the
government secures funding commitments from multilateral lenders and
foreign governments.
Teves said the upcoming forum also aims to come
up with a solution on how to harmonize the procurement procedures of
public agencies.
He had said the government has to heavily invest
in infrastructure this year so the Philippines can tide over a
possible US recession. To do this, the finance department earlier
announced plans to tap state-owned Land Bank of the Philippines and
Development Bank of the Philippines for the required amounts in the
first half of this year.
The government wants to front-load its
infrastructure and social spending in the first semester to sustain
the country’s economic expansion.
On top of issuing state guarantees, the
government also wants to secure peso-denominated loans from the
foreign donor community.
”We would like to explore the
possibility of borrowing in pesos,” Rolando G. Tungpalan, NEDA
assistant director-general told reporters.
In a separate briefing, the NEDA official said
this would prevent project cost increases as well as minimize
exchange rate risks.
Most of the current foreign-assisted
infrastructure projects bear an exchange rate of P53 to the dollar
when the NEDA Investment Coordinating Committee (ICC) approved them.
This means the government is unlikely to benefit from reduced debt
servicing costs as a result of the local currency’s recent
appreciation vis-à-vis the greenback.
Last year, the peso rose by more than 15 percent
against the dollar. Last Wednesday, the local currency closed at
41.69 against the greenback.
In its 15th Official Development
Assistance (ODA) portfolio review, NEDA said some of the state-run
corporations and financial institutions were exceeding ICC-approved
project costs, mainly due to their understanding that the projects
are monitored and assessed based on the amount and currency of the
foreign exchange loan instead of the approved amount in pesos.
In 2006, NEDA said 25 projects in the ODA
portfolio incurred cost increases amounting to P30.338 billion.
The Department of Public Works and Highway
accounted for the bulk of the increase at 42 percent or P12.832
billion for 13 projects, followed by the Department of Transportation
and Communication with P6.689 billion for 4 projects, the
National Irrigation Authority with P4.424 billion for 4 projects,
and the Light Rail Transit Authority with P4.105 billion for 1
project.
The NEDA said the common reasons cited for
cost increases were currency exchange rate movements, claims for
price escalation, administrative costs, additional civil works,
increase in right-of-way/ land acquisition/ resettlement costs;
increase in unit cost of labor, materials and equipment; high bids;
and increase in consultancy services.
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