The Philippine Institute for Development Studies (PIDS) said on Friday that there are two new potential fund sources for infrastructure development that the government has overlooked to ramp up financing construction and infrastructure in the country.
In their study “Financing Infrastructure in the Philippines” presented on Friday, PIDS research fellow Adoracion Navarro said that the government should look into the two new infrastructure financing sources that can help the government in financing construction and infra projects in the country: Asean Infrastructure Fund (AIF) and the Philippine Investment Alliance for Infra (Pinai) Fund.
Navarro said that the country should take advantage of Asean and Pinai funds as well as other official development assistance (ODA) loans to help us achieve the 5-percent target share of infrastructure to the country’s gross domestic product (GDP), compared to near 3-percent infra GDP share at present.
According to the PIDS study, the AIF has a total of $4-billion (P172-billion) fund available for lending commitments through 2020, as it has started lending operations in the second half of the year. The Asian Development Bank (ADB) on their website said that the AIF already has $1-billion worth of projects to finance and in the pipeline for the next three years.
Navarro said that the Philippines also contributed $15 million (P645 million), as the country is included in AIF’s shareholders as well as Brunei, Cambodia, Indonesia, Laos, Malaysia, Singapore, Thailand, Vietnam and the ADB. The fund was incorporated through the aid of Malaysia in April last year.
Another ADB-influenced infra fund—Pinai fund—was dubbed as the “largest infrastructure fund” for the Philippines alone with a total of $625 million (P25 billion) of funds put up by the end of July last year by four funding institutions: Government Service Insurance System (GSIS), ADB, Netherlands-based Algemene Pensioen Groep and Macquarie Group.
Navarro said that not only the AIF and the Pinai fund are the infrastructure financing sources available to meet the 5-percent target share in the country’s GDP, but also various ODA sources such as multilateral institutions like ADB, United Nations, World Bank, among others, while bilateral sources can be tapped as well such as China, Japan, South Korea, Canada, European Union, Usaid, among others.
“ODA loans reliance is decreasing but [projects]grants are increasing . . . because national funding sources are becoming more sustainable in recent years [last five years as per the study period]due to healthier fiscal position, positive performance of the economy, and improvements in the government’s revenue generation effort,” Navarro said, citing the key findings of their study.
Besides decreasing reliance of ODA loans and new sources of financing infrastructure, Navarro and another PIDS research fellow Gilberto Llanto found that there was “underspending” in infrastructure for the last five years; there is “weak capacity of implementing agencies to process and tender public-private partnership [PPP] projects, and the proposed amendments to PPP law is still pending”; and there is liquidity in banking system which should be taken advantage by the government.