Gov’t assumes careful stance on PPP funding

MANILA, Philippines—The government’s investment arm, National Development Co. (NDC), intends to issue bonds in increments “as needed” to help finance public-private projects, Finance Secretary Purisima said in an interview.

While the government, through financial institutions and social service arms, is ready to issue up to P200 billion in bonds, Malacañang has yet to green-light the issues, particularly to NDC’s, the finance chief said.

Malacañang is particularly keen on the so-called PPP (Public-Private Partnership) infrastructure bonds, denominated in pesos, the proceeds from which will be used to fund development projects, Purisima said.

“In case the gap between a project’s financial feasibility gap and economic desirability is substantial, we may decide to come in and help [the proponents] with funding,” Purisima said. “We borrow at a lower cost and pass it on to the proponent.”

He clarified that the government would only make the funds “available as needed.”

“For example, if a project needs P1 billion, we will only issue bonds worth that amount,” Purisima said.

Purisima further said that financial consultants whom the government had engaged were still working on how funding for PPP projects would be split between the public and the private sectors.

“We have hired a large, reputable international organization, and the Development Bank of the Philippines is set to facilitate the procurement process,” he said.

Also, the Department of Finance (DoF) has been mulling over the creation of a debt and risk management unit as it exerts more effort to bring down the country’s debt stock gradually from the current 56.2 percent of domestic output to 47 percent by 2016.

According to a Malacañang document, the creation of such a unit at the DoF is meant “to optimize savings.”

The paper cited related steps toward this end, including the setting up of a comprehensive debt management system that covers contingent liabilities and PPP-related fiscal risks.

The report added that authorities would also introduce innovative terms and features in the conduct of raising funds.