Phl infra program needs optimal funding mix – ADB

The Asian Development Bank (ADB) is urging the Philippine government to find the optimal funding mix for its ambitious infrastructure development program to spread risk and gain access to new technologies that can be provided by the private sector and other development partners.

During Tuesday’s launch of the Asian Development Outlook 2017 Update, ADB officials and economists said the diversification of funding sources for the government’s $160-billion Build Build Build program that will be carried out until the end of the Dutere administration should be seen as a positive approach.

The government is increas- ingly leaning towards the use of official development assistance (ODA) to fund the construction of flagship infrastructure projects, much to the chagrin of the private sector that thinks it is being left out of the action. The administration has repeatedly said this is not so, as foreign contractors that will undertake the construction may subcontract sections of the projects to Filipino contractors and the operations and maintenance (O&M) component of the projects may eventually be auctioned off to Filipino firms.

Another key issue raised with this approach was the possibility that foreigners may end up taking jobs away from Filipinos. Economic managers have said hiring of foreign labor would be limited to those with key technical skills such as engineers and other highly-skilled workers with the manual labor reserved for Filipinos.

The Public-Private Partnership (PPP) Center is also shifting its focus to facilitating vital projects at the local government level. It has already started consultations with local government units (LGUs) on the use of the PPP mode of project financing as well as the various facilities they can tap for pre-investment activities, one of which is the $73 million Asia Pacific Project Preparation Facility (AP3F) of the ADB which receives funding from Japan, Canada and Australia.

“It’s a mix optimization process that’s going on,” said ADB country director Richard Bolt.

The use of ODA from development partners, he said, would work to the government’s advantage if these can bring innovation and give access to technology that will contribute to the sustainability of projects.

“In terms of ODA, what agencies are looking for is how we can bring innovation on that public investment program. But if it’s clearer that the project is best suited for PPP, we continue to provide support for the PPP Center,” said Bolt.

ADB principal country specialist Joven Balbosa said the ongoing diversification of project financing should also be seen as a maturation of the country’s PPP program that was started in the 1990s and institutionalized under the Aquino administration.

“The Philippines is one of the very few countries that early on in the ’90s had the foundation law, the Build-OperateTransfer (BOT) law and over the years it has supported that. The last administration put up the PPP Center, so there is that building up and from there. This administration utilized that more fully by looking at the optimal mix. It’s one of the tools for infra development and also for financing public sector targets because there are also PPPs in social sector, education, health. So look at it as a building up of instruments the government can use over time. And it is continuing to evolve,” he said.

Balbosa noted, however, that in pursuing PPP projects, the risk should be well-distributed between the government and the private sector.

Aekapol Chongvilaivan, economist for the Philippine country office, said with the mammoth size of the administration’s infrastructure program, the government should have knowledge of all the available sources of financing.

“The government’s ambitious infrastructure development program is expected to cost $160 billion to $180 billion. It is therefore important for the government to be able to mobilize resources from every source including private financing and ODA. And therefore, it is optimal for the government to mix different sources for infra projects,” he said.