‘Big bang lending’: ADB doubling PH loans to $12.1B until 2022

In what an official dubbed as a “big-bang lending program,” the Asian Development Bank (ADB) on Thursday said it will lend its host country, the Philippines, up to $12.1 billion between 2019 and 2022 or a record $3 billion yearly.

ADB country director for the Philippines Kelly Bird told a press briefing that from a total of only $6.4 billion in approved loans or $800 million annually from 2011 to 2018, the Manila-based lender was “scaling up significantly” its financing, especially for transport and agriculture projects. The increase is nearly double.

With up to $3 billion in annual financing, the Philippines would easily be among the top three beneficiaries of ADB loans in the next three years, Bird said.

Last year, the Philippines received $1.4 billion in loans, the fifth-biggest among ADB’s members. This year, the projected $2.6 billion would be the second-largest after those being extended to India, according to Bird.

The ADB also “balanced” sectors that would benefit from loans with transport now becoming the biggest beneficiary.

From 2019 to 2022, 59.9 percent of the ADB’s lending portfolio to the Philippines will be for transportation projects; 14 percent for public sector management programs supporting the government’s policy reforms and 9.9 percent for projects in the agriculture and natural resources sector.

While the ADB lends heavily to infrastructure across the region, the 2019-2022 lending pipeline for the Philippines was “custom-made, reflecting the government’s priority of ‘Build, Build, Build,’” Bird said, referring to the Duterte administration’s ambitious infrastructure development program.

The ADB was also ramping up lending to agriculture as Bird noted that the sector had become a “drag to economic growth” during the past two to three years.

“You still have a large segment of the population reliant on agriculture,” said Bird.

“And if you look at the reasons why it’s been a drag, one is the low competitiveness,” the ADB official added.

Policy restrictions in the past had been a “drag on agriculture.” The Duterte administration’s “major reforms” were helping “set the agriculture sector on a par for improved competitiveness.”

“What we’re doing now is implementing some programs and projects that are going to support that,” said Bird. “We now see agriculture as priority,” he said.

In comparison, between 2011 and 2018, the top three sectors that received the biggest ADB loans were public sector management (53 percent of total), finance (14 percent), and education (12 percent)—while lending for transport was only 7.7 percent, and for agriculture and natural resources, just 1.6 percent of total.

This year, the ADB’s lending program included two already approved projects—$1.3 billion for the Malolos-Clark Railway Project and $300 million for the Secondary Education Support Program.

Expected to be approved by the ADB board in November and December were the following loans: additional financing for the Infrastructure Preparation and Innovation Facility ($200 million); additional financing for the Angat Water Transmission Improvement Project ($126 million); the Local Government Development Program ($300 million); Capacity-Building to Foster Competition Project ($25 million); and Facilitating Youth School-to-Work Transition Program ($400 million).

For 2020 to 2022, Bird said the ADB “realistically” targets at least $2.5 billion in loans to the Philippines per year as some proposed projects may prove to be unfeasible.

The projects in the ADB’s Country Operations Business Plan for the Philippines 2020-2022 pipeline “must complete government approvals, including meeting thresholds for economic rates of return, before financing decisions are made,” Bird said.

Also, “amounts can change based on approved feasibility studies,” he added.

The big-ticket projects lined up for the ADB’s financing in 2021 included the following: South Commuter Railway Project between Manila and Calamba, Laguna ($1.2 billion); Integrated Flood Risk Management Sector Project to manage and minimize flooding in six river basins—three in Mindanao, two in Luzon and one in Visayas ($400 million); Support to Capital Market Generated Infrastructure Financing Program ($300 million); Metro Manila Bridges Project to build three bridges along Marikina River ($180 million); and EDSA Greenways Project ($100 million).

Also for ADB board approval next year were the Support for Agrifood System Competitiveness Program ($300 million); Philippine City Disaster Insurance Pool Project ($100 million); Sustainable Tourism Development (Livable Cities Investment) Project ($100 million); Regional Development Facility ($40 million); Davao Public Transport Modernization Project ($70 million); Local Government Revenue Mobilization Project ($28 million); Expanded Social Assistance Assistance Project for the government’s Pantawid Pamilyang Pilipino Program or 4Ps ($500 million); and Inclusive Finance Development Program ($300 million).

For 2021, loans in the pipeline included $500 million for the Metro Rail Transit (MRT) Line 4 Project between Ortigas Center and Taytay, Rizal; $500 million for Bataan-Cavite Bridge Project in Manila Bay; $500 million for Laguna Lakeshore Road Transport Project; $1-billion second tranche for Malolos-Clark Railway Project; $100 million for Mindanao Irrigation Project; $300 million for Local Government Development Program; $300 million for Facilitating Youth School-to-Work Transition; and $300 million for the Support to Universal Health Coverage Project./TSB