November 21, 2017 | MANILA, PHILIPPINES

Gov’t pitches banks on capital-market funding for infrastructure drive

THE Department of Finance has invited institutions like Nomura Group to explore financing Philippine infrastructure projects, promising to take away much of the risk from lengthy procurement processes by allowing the government to initiate the works itself.

“The [traditional] PPP (Public Private Partnership) method takes too long to negotiate the terms of the agreement. We will initiate the project and decide at a certain point when to make it a PPP, perhaps towards the middle or towards the end. Investment banks like Nomura which are active in the capital markets may be able to help,” Finance Secretary Carlos G. Dominguez III said during a meeting with the Nomura Group in Japan earlier this week.

According to Mr. Dominguez, the government will start the projects using internal funds to get things rolling while private concessions will be issued once implementation is well under way.

“Accelerating the implementation of the projects by having the government start them will be the strategy,” he said.

A traditional PPP program usually takes around 29 months before projects actually start breaking ground, Mr. Dominguez said.

Attending the meeting were Toshiyasu Iiyama, Senior Managing Director of Nomura Holdings, Inc. and Executive Chairman, Asia ex-Japan; Masahiro Goto, a Senior Managing Director and the Global Head of Capital Markets for Nomura Securities Co., Ltd; and Makoto Totsuka, President/Country Head of Nomura Securities Philippines, Inc.

Apart from PPPs and government funding, loans through Official Development Assistance (ODA) from Japan and China will also play a role in “hybrid” financing schemes.

The government has utilized the financing mix on two road projects, the Plaridel Bypass Road, which will link the North Luzon Expressway (NLEx) in Balagtas, Bulacan with the Maharlika Highway in San Rafael, Bulacan; and the Central Luzon Link Expressway (CLEx), which will connect Cabanatuan City in Nueva Ecija to Tarlac.

This year, the government expects to break ground on three railway projects outside Metro Manila, as well as new public transport and new bridges using the same scheme.

These are the Clark-Subic rail line, Tutuban-Clark rail line, the 581-kilometer South Line of the North-South Railway Project connecting Tutuban, Calamba, Batangas and Bicol, Clark International Airport, the Metro Manila Bus Rapid Transit traversing Edsa, and three bridges crossing the Pasig river.

Nomura officials said they can help tap the capital markets to ease the burden on banks and enable investors to participate in funding infrastructure projects.

The government aims to spend P8.4 trillion over the medium term. It hopes to curb poverty rates to 14% by the end of its term from 21.6% in 2015 and cut unemployment to 3-5% over the same period.

This year’s P3.35-trillion national budget will see spending on public infrastructure to increase 13.79% to P860.7 billion, equivalent to 5.4% of gross domestic product (GDP) in 2017 from 5.1% in 2016, then ramping it up to 7.1% of GDP by 2022. -- Elijah Joseph C. Tubayan