ADB, World Bank commit to raise aid

TWO multilateral institutions on Wednesday said they would accelerate their loan assistance to the Philippines for the next three years.

“We are almost coming to an end in our discussion with the government on the medium term strategic direction of the ADB program and the tentative pipeline of our assistance from 2012 to 2014,” Neeraj Jain, country director of the Asian Development Bank told reporters on the sidelines of the Economic Journalists Association of the Philippines forum.

Jain said ADB plans to provide $2 billion for the 2012 to 2014 period, or around $600 million to $700 million a year.

“This is very indicative, and there are several factors that go into it. First and foremost is the readiness of prepared projects and programs. If the government demands more than this, we will be ready to consider that. If prepared projects are not available, it could be less than that,” Jain said.

In 2009, ADB provided loan assistance of $1 billion to the Philippines.

Also during the EJAP forum, Bert Hofman, country director of the World Bank, told reporters the lender may increase loan assistance to the Philippine by 50 percent.

“We want to do more. The government has asked us to do more so we are still looking at doing more,” Hofman said.

The annual World Bank loan assistance to the Philippines amounts to between $700 million and $1 billion.

Jain said the ADB is keen on supporting the Aquino administration’s Public-Private Partnership initiative.

“We know that a number of PPP projects are now being readied, and are rapidly moving forward to the bidding stage. So yes, we are in touch with a number of private companies for the financing of ppp projects,” he said.

He also said the ADB provided the Philippines a $10 million grant to help the government prepare PPP projects and support the PPP Center.

Local banks can fund PPP

Amid the multilateral lenders’ commitment, an investment banker said that local banks can fund most of the PPP projects.

Ed Francisco, president of BDO Capital and Investment Corporation, said local banks could provide P131 billion to the PPP assuming they lend at their single borrowers’ limit. At present, the Bangko Sentral ng Pilipinas requires lenders to maintain a 25 percent SBL.

“Our 58 percent loan/deposit ratio has room for additional loans. Over P2 trillion in government securities as banks look for investment outlets. [Banks] can fund most of PPP if needed and contribute to development of our country,” Francisco told reporters.

Citing a June 9 PPP conference, he said the government has 25 projects with a total funding requirement of P520 billion.

Assuming that 70 percent of the funding will be sourced from banks, then these projects would need only P360 billion in loans, the banker said.

Even if Philippine banks lend this amount, it accounts for only 20 percent of special deposit accounts and 13 percent of total deposits, he said.

Latest data from the BSP showed that financial institutions’ placements in the central bank’s SDA facility stand at P1.6 trillion.

BSP Deputy Gov. Diwa Guinigundo said these funds are “readily available” for investment in projects such as the PPP, adding that banks can withdraw them from the central bank anytime.

Large infrastructure projects, of which PPP may fall under, may be a large part of a bank’s loan growth, even as lenders continue to support other industries such as real estate, business process outsourcing and tourism, Francisco said.

He said the problem lay in the delay in the government’s feasibility studies, which may temper investor interest in the PPP. –DARWIN G. AMOJELAR AND LAILANY P. GOMEZ, Manila Times