P200-B government support for PPP sufficient – Malacañang

By VG Cabuag, Business Mirror

Posted at Jan 25 2011 10:36 PM | Updated as of Jan 27 2011 08:38 AM

MANILA, Philippines - The Aquino administration is not likely to release more than the P200 billion promised by state-owned financial institutions to fund the government’s public-private partnership (PPP) initiative.

Budget Secretary Florencio Abad said given the high liquidity in the domestic market, the P200 billion is already a significant amount to fund the big-ticket infrastructure projects, mainly roads and bridges.

“We prefer that the banks [and financial institutions] come up with their own guidelines in lending to PPP investors. As much as possible we want to leave it up to the private sector,” Abad said.

According to the plan, the Government Service Insurance System and the Social Security System will contribute P50 billion each for the initiative, while the state-owned Land Bank of the Philippines and Development Bank of the Philippines will also give P50 billion each for the projects.

These institutions will not directly lend the money to the proponents, but will issue a bond or sell its debt instrument to the participating companies.

Multilateral financing institutions have also said during the PPP conference in November that they are looking at not only providing concessional financing to PPP investors but also investing on the projects themselves. Finance Secretary Cesar Purisima earlier said the Department of Finance (DOF) was looking at floating a 25-year peso-denominated zero-coupon bond for the PPP initiative.

He said the DOF is still studying which agency will package and float the debt instrument. ?

Zero-coupon bonds are instruments that pay no interest but instead are sold at a deep discount of its face value.

Abad, meanwhile, said being an emerging economy, the Philippines is an attractive investment destination for bigger economies, which are looking for higher yields on their investments.

“We want private funds used rather than government intervening on the matter. That way, [the transaction] would be business sector to business sector.

“We are just here to support and shield them from regulatory risks.? That way, we will attract more investors from the private sector,” Abad explained.

He also said any directive from Malacañang on PPP financing would focus on the utilization of the P200-billion fund that was earlier committed by the four government financial institutions and the rest will be up to the private sector.