Filtered By: Money
Money

RP may give guarantees for infrastructure loans


MANILA, Philippines - The Philippine government may agree to pay for debts of companies implementing infrastructure projects if these fail to settle their obligations, a cabinet secretary said. The government may guarantee 85 percent of the loans incurred by private and state-led companies that will build roads, bridges, and schools as part of economic pump-priming efforts. If approved, a proposal will make it easy for private companies to secure loans from banks and other financial institutions since these debts will carry a sovereign guarantee. The said guarantee gives an assurance that loans will be paid by the government if private companies fail to do so. However, the move may also increase the national government’s debts, thereby resulting in a wider fiscal deficit. “Projects within [the Medium Term Philippine Development Plan 2004-2010 (MTPDP)] will be eligible for sovereign cover, but it’s not automatic," Trade Secretary Peter B. Favila said in an ambush interview, citing results of an economic managers’ meeting. The proposal has yet to be approved by President Gloria Macapagal-Arroyo, Favila added. The initiative – which will allow government to make loan guarantees through the Philippine Export Import Credit Agency (Philexim) – intends to encourage banks to make more funds available to borrowers. Banks are currently risk-averse, tightening lending policies during the global crisis to ensure that only the most creditworthy can secure access to funds. Philexim is formerly known as the Trade and Investment Development Corporation of the Philippines (Tidcorp), an agency whose previous name was the Export and Foreign Loan Guarantee Corporation of the Philippines (Philguarantee). Before it was transformed into Philexim by a 2002 Executive Order, Tidcorp’s primary functions include “guarantee[ing] in whole or in part, approved foreign loans granted to any entity, enterprise or corporation licensed to engage business in the Philippines, among others. A similar proposal was undertaken by the Marcos regime more than two decades ago but debts borrowed by private companies — especially those owned by individuals close to the regime — ended up being paid for by the government, former national treasurer Leonor M. Briones told GMANews.TV. “We are repeating the mistakes of the past," Briones said. “We must warn against it." Under the arrangement, projects could be overpriced, making these a source of corruption, she added. Next: Private companies requested government guarantees for infrastructure projects Private companies requested government guarantees for infrastructure projects Private companies made the request through the Philippine Chamber of Commerce and Industry (PCCI), Favila disclosed. The PCCI is the largest business group in the Philippines. “We’re looking at an 85-15 percent ratio, meaning to say that 85 percent of the project cost [will be covered through the Philexim guarantee," he said. The proposal will not be detrimental to government since the arrangement will only cover loans intended for infrastructure projects under the MTPDP. A long list of projects examined by the National Economic and Development Authority (NEDA) are now “ready to go" as soon as capital is available, Favila said. “Private companies remain willing to finance the government’s infrastructure programs," the trade official said, citing talks with private businessmen. “We are currently addressing credit exposure issues by way of a government guarantee," he said. “We hope to get to see some of the projects taking place within the first semester." Under the MTPDP, the country’s “lack of infrastructure" has been identified as one of two impediments to investor confidence and economic growth. The other impediment is the Philippines’ large public sector deficit, said an Office of the President website that featured the MTPDP. “Priority transport infrastructure projects" include “completion of the Nautical Highway," as well as “developing roads and rail systems that will decongest Metro Manila and support the development of new centers of government, facilitate access to tourist areas, and support the affirmative action for peace and development in Mindanao and other highly impoverished areas." The nautical highway involves the development of Roll-On, Roll-Off (RORO) system, or facilities that allow trucks onboard special vessels to immediately exit docks through ramps as soon as ships reach ports. Besides stimulating trade and tourism, the RORO system is also expected to reduce transport costs and cargo handling, the MTPDP said. - GMANews.TV
LOADING CONTENT