China open to hybrid financing plan

The Chinese government is open to the so-called “hybrid” financing of infrastructure projects earlier pitched by the Philippine government, the Department of Finance Thursday.

In a statement, Finance Secretary Carlos G. Dominguez III said China Commerce Minister Gao Hucheng had welcomed the proposal “to consider cofinancing the projects with other multilateral lending institutions such as the Asian Development Bank (ADB), World Bank, and China-led Asian Infrastructure Investment Bank (AIIB).”

According to Dominguez, Gao told Philippine economic managers who met with Chinese officials in Beijing on Jan. 23-24 that they wanted “to clarify the operating procedures” for hybrid financing arrangements to know “if this would lead to a more efficient and smooth implementation of the project.”

Ranking Chinese officials have agreed with the delegation on the urgency of implementing projects that Manila had proposed to China for possible financing under the Duterte presidency, Dominguez said.

Last Sunday, Dominguez said hybrid financing “would enable the government to profitably manage the leveraging” of close to P1 trillion in official development assistance (ODA) and loans that it had secured from Japan and China alone in just six months of the Duterte presidency.

Dominguez said doing so would bring down borrowing costs.

“Our major plan here is to leverage that. That is, to take projects and then use part-ODA and part-multilateral agency loans so that we can actually increase the number of projects that we can do,” the Finance chief said.

Hybrid financing, he explained, would involve, for instance, a mix of ODA, that provided concessional interest rates of 0.2-0.5 percent, with development funds from the ADB and the World Bank to execute an infrastructure project. Combining both types of financing sources would thus enable the government to build more big-ticket infrastructure projects.

“That’s like putting a jigsaw puzzle together using ODA from China and matching that with AIIB and ADB funds,” Dominguez said.

The Philippine government has pitched 40 infrastructure projects for either funding or technical support from the Chinese government.

Dominguez earlier said 15 projects were proposed for loan financing. The 25 other projects were proposed for assistance in the conduct of feasibility studies.

Among the projects pitched for funding were the $3.01-billion south line of the North-South Railway; the $374.03-million New Centennial Water Source-Kaliwa Dam Project in Quezon province and the $53.6-million Chico River Pump Irrigation Project in the provinces of Cagayan and Kalinga.