The regional development arm of the United Nations for the Asia-Pacific region has found the Philippines as the “most ready” among the 10 member-states of the Association of Southeast Asian Nations (ASEAN) in carrying out a massive infrastructure buildup owing to several positive factors buttressing the economy, according to the Department of Finance (DOF).
DOF Undersecretary and Chief Economist Gil Beltran said these positive factors cited by the UN Economic and Social Commission for Asia and the Pacific (UNESCAP) include substantial financing opportunities from the Philippines’ development partners, the government’s tax reform program and rising revenue collections, and the declining debt service ratio, which all contribute to an adequate fiscal space that would allow the country to pursue an expansionary policy on the Duterte watch.
The UNESCAP, the largest UN body serving the Asia-Pacific, recently convened in Manila its Workshop on Infrastructure Financing Strategies to discuss the Philippines’ infrastructure needs and different financing modes and sources available to the country.
Beltran, who represented the DOF in the dialogue held at the Shangrila Hotel in Makati City, said that besides its ample fiscal space, the workshop also cited the country’s strong financial system, which is teeming with excess liquidity, and supported by a good supervision and a rising savings rate.
“The Workshop found the Philippines to be among the most ready in ASEAN in boosting infrastructure development,” Beltran said in his report to Finance Secretary Carlos Dominguez III.
Beltran said UNESCAP also cited the government’s “strong project evaluation and prioritization system based on economic viability” in undertaking infra projects, and a Right-of-Way Law or Republic Act 10752, which encourages the government and landowners to agree promptly on land transactions for infrastructure projects.
Another favorable factor cited by UNESCAP “is the country’s Public-Private Partnership (PPP) law that sets up an institution and a set of rules to implement projects in an orderly manner and a private sector that is aggressive in participating,” Beltran said.
“However, the Workshop also took note of the dearth of projects from less developed regions and scanty participation by the local government units, despite the assistance available for their PPP projects through the Municipal Development Fund Office (MDFO),” Beltran added.
Dominguez has told potential investors in the country’s “Build, Build, Build” infra program that a sizable portion of the spending for this initiative, which will generate “an impressive multiplier effect” in the form of more jobs and investments, will go the country’s poorest provinces.
The finance chief also said the Philippines’ economic strategy takes advantage of the country’s benign debt conditions, low interest rates, investment-grade credit ratings, and improvements in the ease of doing business that the Duterte administration will continue to enhance by streamlining government operations and cutting red tape.
At a recent economic briefing in Singapore, Dominguez noted that from 2010 to 2016, national government debt as a percentage of GDP declined from 52.4 percent to 42.2 percent, which is lower than the ASEAN average of 46 percent and the emerging market’s average of 47 percent.
Government revenues allotted to servicing interest payments, meanwhile, declined from 24.4 percent in 2010 to 14.5 percent as of the first quarter this year, he noted.
Also, from 2010 to 2016, the Philippines moved up 49 notches in the World Bank’s Ease of Doing Business Index and improved 57 notches in the Heritage Foundation’s Index of Economic Freedom.
In the same period, the country received 24 positive credit rating actions from the various rating agencies, Dominguez said. “The Philippines currently holds investment-grade rating, with a credit default swap spread below the ASEAN average.”
The Philippines posted a GDP growth rate of 6.9% for 2016, and 6.4 percent and 6.5 percent, respectively, in the first and second quarters of 2017, leading Southeast Asia in the pace of economic expansion.
Dominguez said that over the remaining five and a half years of the Duterte administration, it has programmed over $170 billion in infrastructure spending, of which $23 billion will go to the infra program next year.
He said a significant portion of the programmed funds will be drawn from Official Development Assistance (ODA) lending which, on the average, carries interest charges a full percentage point below the best that the commercial markets can offer.
REF: PAOLA ALVAREZ - Department of Finance
Email: palvarez@dof.gov.ph
