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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 governmentâs debts, thereby resulting in a wider fiscal deficit. âProjects within [the Medium Term Philippine Development Plan 2004-2010 (MTPDP)] will be eligible for sovereign cover, but itâs not automatic," Trade Secretary Peter B. Favila said in an ambush interview, citing results of an economic managersâ meeting. The proposal has yet to be approved by President Gloria Macapagal-Arroyo, Favila added. The initiative â which will allow government to make loan guarantees through the Philippine Export Import Credit Agency (Philexim) â 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, Tidcorpâs primary functions include âguarantee[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 â especially those owned by individuals close to the regime â ended up being paid for by the government, former national treasurer Leonor M. Briones told GMANews.TV. âWe are repeating the mistakes of the past," Briones said. âWe 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. âWeâre 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 âready to go" as soon as capital is available, Favila said. âPrivate companies remain willing to finance the governmentâs infrastructure programs," the trade official said, citing talks with private businessmen. âWe are currently addressing credit exposure issues by way of a government guarantee," he said. âWe hope to get to see some of the projects taking place within the first semester." Under the MTPDP, the countryâs âlack of infrastructure" has been identified as one of two impediments to investor confidence and economic growth. The other impediment is the Philippinesâ large public sector deficit, said an Office of the President website that featured the MTPDP. âPriority transport infrastructure projects" include âcompletion of the Nautical Highway," as well as âdeveloping 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
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