World Bank Ready to Fund PPPs

The World Bank may finance Philippine infrastructure projects lined up for public-private partnerships (PPPs) through a peso-denominated bond issue if the government needs help, the multilateral lender's country director said.

 

The bank, however, will wait until state agencies roll out their bidding frameworks at a conference this month before plans are finalized, Bert Hofman told BusinessWorld last week.

 

If approved, World Bank funding could benefit 10 transportation and water supply projects listed earlier by Malacañang and another five agriculture and energy ventures bared by the Trade department last week.

 

The Aquino administration is scheduled to stage an investment conference on Nov. 18-19 to drum up private sector interest in PPP projects. This tack comes as the government aims to cap the 2011 budget deficit at P290 billion after a record P325-billion shortfall was targeted for this year.

 

"We think we can play a role by giving advice. We have financial aspects as well if the government desires," Mr. Hofman said in a chance interview, citing the possibility of "peso financing through international bond issues."

 

The World Bank, through the International Bank for Reconstruction and Development, has issued bonds for other member countries in the past.

 

These have financed, for instance, the reconstruction of storm-damaged power and water facilities in the Dominican Republic and energy efficiency projects in Montenegro.

 

"It's important since the infrastructure revenues are going to be in peso. They need peso financing," Mr. Hofman said.

 

He declined to name which of the projects have interested the World Bank, but noted that its private lending arm, the International Finance Corp., had helped draft feasibility studies for the planned Light Rail Transit South Extension.

 

"After the conference, it will be more concrete," Mr. Hofman said, adding that the bank will first hear out the government's "framework for PPP."

 

So far five more projects have cropped up on top of the 10 worth P127.8 billion listed by Malacañang, a document given to reporters late last week states.

 

The draft, which Trade Undersecretary Cristino L. Panlilio said forms part of the Trade department's presentation at the conference, includes two agribusiness and three wind energy projects:

 

• *the Kabulnan-2 multipurpose irrigation and power project ($319.40 million);
• logistics support for the fishery supply chain ($33.33 million);
• a wind farm power project ($125 million);
• Northwind Pamplona Project ($75 million); and
• the Northwind Aparri Project ($100 million).

 

These are "priority projects ready for tendering in 2011", the document states.

 

Forty other power projects have been earmarked for PPP inclusion the longer-term totaling P348.5 billion, the document sates further.

 

As this developed, an Asian Development Bank (ADB) official urged emerging economies to use significant dollar savings and to mobilize private sector support for new infrastructure.

 

"The infrastructure challenge for developing Asia is one of the most daunting we face today," the ADB quoted its president, Haruhiko Kuroda, as telling delegates at the Infrastructure Finance Forum in Japan.

 

The Manila-based ADB, Asia-Pacific Economic Cooperation Business Advisory Council and the Japan Bank for International Cooperation sponsored the conference.

 

"The needs are immense with ADB calculating that about $8 trillion in new infrastructure investments will be required in the region through to 2020 to support current levels of economic growth," the bank said, adding that gross domestic savings in emerging Asia already reached almost $4 trillion last year.

 

The ADB said much of the cash has been underutilized, with "regulatory obstacles, currency mismatches and underdeveloped capital markets hindering broader financing of essential infrastructure."

 

The bank said that of the total infrastructure needed, energy and electricity will cover 40%, followed by transport at some 25%. Social infrastructure for education, health, water and sanitation, and other public goods will take up another 25%. Investments in telecommunications will account for 10%.

 

To mobilize existing resources, emerging economies need to reinforce existing legal and regulatory frameworks to attract more private investors and financing. Further development of local capital markets and more lending in the domestic sector will also help address currency mismatches which are a hindrance to investors in the sector, the ADB said. -- with a report from Jo Javan A. Cerda

 

 

*Source: BusinessWorld Online