Banks set to fund PPP but projects not ready

MANILA, Philippines—Banks are raring to finance public-private partnership (PPP) infrastructure projects, but the government appears to be dragging its feet, according to an industry official.

According to Marcelo Ayes, senior vice president of Rizal Commercial Banking Corp., some P1.3 trillion in funds are now parked at special depositary accounts with the Bangko Sentral ng Pilipinas.

Ayes was referring to a BSP facility through which banks and other financial institutions maintain fixed-term deposits, enabling them to effectively manage excess liquidity.

The Bangko Sentral in November 1998 opened its SDA facility, allowing banks and their trust departments, as well as those of non-bank financial institutions, to set up fixed-term accounts where they could deposit their cash resources.

Currently, seven-day SDAs yield 4.0625 percent while two-week and one-month SDAs yield 4.125 percent and 4.1875 percent, respectively.

Concerns

“If you add other [liquid assets in the domestic market], available funding is more than double the P700 billion the government said it needs for the major PPP projects,” Ayes told the Inquirer.

“Banks are willing to help address the country’s need for infrastructure, within the limits of regulatory requirements, especially those relating to exposure and capitalization,” he added.

But Ayes admitted that the finance institutions would not expose themselves needlessly to risks that their “viability would be endangered … there are regulations that are meant to ensure this.”

At present, banks are also looking at concerns raised by international observers, such as multilateral institutions like the World Bank, Ayes said.

Before foreign investors consider the transfer of substantial funds to support a particular public project in the country, the Philippine government will have to provide firm foundation in terms of improved investment climate and must address investors’ fears of legal and administrative complications that may threaten the project, foreign observers said.

“Persistent problems about conflicting national and local government policies, court orders and other such complications, will not help PPPs to take off,” Ayes said. “Banks’ commitment is tentative at this point, but we agree that PPPs should be pushed by addressing all these concerns. Right now, government efforts to this effect are rather slow.”

Most promising

Early in February, Finance Secretary Cesar V. Purisima said Malacañang had committed itself to 11 major PPP projects this year. The government must bid out a few of these projects in the first six months of the year.

But Philamer C. Torio, executive director of the PPP Center of the Philippines, said all the projects lined up for funding would still have to be backed by feasibility studies. Some studies have yet to be completed or need to be updated.

Torio said the NAIA [Ninoy Aquino International Airport] Expressway seems to be the most promising in terms of readiness. He was referring to the $253.33-million, 4.9-kilometer elevated link between the Skyway and the Manila-Cavite Coastal expressways to the NAIA terminals.

He expressed confidence that bidding for the NAIA Expressway project would be conducted in June or July.

The government is also seeking help from private firms to build a new airport in Panglao Island off Bohol; refurbish another in Puerto Princesa City, Palawan; and build a third in Daraga, Albay.

A fourth airport, the $28-million Laguindingan airport in Misamis Oriental, will be privatized, along with the Light Rail Transit Line 1 and Metro Rail Transit Line 3.

Expansion

The state will foot the bill for construction work on the expansion of the LRT 1 that spans the length of Taft Avenue from Monumento to Pasay City.

The LRT 1 will be privatized at market price.

Similarly, the capacity of MRT 3—which runs the length of Epifanio de los Santos Avenue—will be expanded, servicing more passengers, at a cost of $140 million.

Operations will subsequently be turned over to a concessionaire.

Also, the LRT 1 will be extended to the south of Metro Manila, while the LRT Line 2 that spans the length of Aurora Boulevard, will be lengthened eastward toward Antipolo City in Rizal.

Other tollway projects included in this year’s PPP package—which private firms are expected to build—are the Cavite-Laguna Expressway, and a link between the North Luzon Expressway and South Luzon Expressway.

Infra work up for funding still needs feasibility studies.