The Philippines and the Asian Development Bank (ADB) signed Wednesday a loan agreement that aims to improve Mindanao’s links to international trade corridors and formalized the exchange of documents on sustaining reforms in the country’s capital markets, in support of President Duterte’s high—and inclusive—growth agenda, according to Finance Secretary Carlos Dominguez III.
Dominguez, this year’s chairman of the ADB Board of Governors, and ADB president Takehiko Nakao signed this afternoon at the ADB headquarters the $380 million loan agreement for the Improving Growth Corridors in Mindanao Road Sector Project (IGCMRSP) and led the official exchange of documents on the $300 million Encouraging Investment Through Capital Market Reforms (EICMR) Program-Subprogram 2.
The first loan program involves the construction of about 280 kilometers of national primary, secondary and tertiary roads and bridges in the Zamboanga Peninsula and Tawi-Tawi in Mindanao, while the second will aid in accelerating investments in infrastructure by establishing a framework to diversify and broaden available funding sources, particularly private sector financing.
“Modernization of our capital markets and infrastructure backbone are the two main tasks the Duterte administration seeks to accomplish over the next five years. These two loan packages fall squarely into the national priorities we have identified,” Dominguez said.
He said the $300 million loan program to finance continuing capital market reforms in the country is “vital to encouraging investments in the economy and broadening public participation in the capital market.”
The loan program for Mindanao, meanwhile, will help in rapidly developing the southern Philippines and realize its growth potentials, which are key elements “in helping us achieve peace and prosperity for the region,” Dominguez said.
According to Dominguez, “The projects funded by this loan cohere with the comprehensive logistics improvement pursued under the Duterte administration. This is part of our Build, Build, Build program.”
“Mindanao is an important component of ADB’s work in the Philippines,” said Nakao. “This project, ADB’s first Mindanao-specific loan in 16 years, builds on our strong partnership with the government over the last five decades to develop the infrastructure and economy of the country’s second largest island. We are pleased to support the Philippines in its effort to improve the lives and livelihood of people in southwestern Mindanao through this road project.”
Dominguez said: “As with all of ADB’s financing packages, the programs covered by these new loans have been thoroughly studied and evaluated. They have passed the tests of suitability and sustainability. These are good loan financing programs whose economic returns far exceed the financing costs.”
The finance chief said implementing reforms in the country’s capital markets will open new avenues for private investments in infrastructure.
Investments in infrastructure, in turn, will attract more investments, ease the movements of people and goods, widen access by producers to markets, boost the competitiveness of tourism and exports, reduce production costs, and create more job opportunities, which are all indispensable factors to achieving inclusive growth for all Filipinos, Dominguez said.
“Although we have improved fiscal capacity to fund the infrastructure program through tax reforms, private investments will carry a major part of the load. By making our financial markets more efficient and more accessible to all citizens, by encouraging long-term savings and increased capital aggregation, we will ensure continuous financial flows towards modernizing our infrastructure backbone and our national logistics system,” Dominguez said.
The finance chief also took the opportunity to thank the ADB for its strong support for the Philippine economy over the past five decades and for its confidence in the Duterte administration’s economic management underscored by the signing of the two loan programs.
“We look forward to more areas of cooperation in the coming days as the Philippines emerges to meet the challenges of development,” Dominguez said.
The Philippine government was able to secure the $300-million EICMR loan for Subprogram 2 of the project following the successful implementation of reforms committed under Subprogram 1, among them, the launching of the modern National Registry of Scripless Securities (NRoSS), the Government Securities Repurchase Agreement (Repo) Program, and the enhanced Government Securities Eligible Dealers (GSED) Program; the implementation of the Personal Equity and Retirement Account (PERA); and the issuance of a Code of Corporate Governance for publicly listed companies.
Through these achievements and the reforms to be implemented under EICMR Subprogram 2, infrastructure investments are expected to be better managed and efficiently implemented, including the project for Mindanao under the IGCMRSP.
The $380-million IGCMRSP, which is ADB’s biggest infrastructure investment in the Philippines approved in 2017, will require a government counterpart of $123 million.
Construction and improvements of roads and bridges under this program will incorporate innovations in structural design, such as climate-change adaptation features.
The program also aims to strengthen the institutional capacity of the Department of Public Works and Highways (DPWH) to more efficiently manage and operate the transport sector both in Mindanao and nationwide.